The investors, which may include a sovereign wealth fund besides the private equity company, will pump money into the unlisted holding company of the Reddy family through quasi-equity instruments, said a banker close to the impending deal. "The proposed deal provides an opportunity to partner with the Reddy family for the growth of the healthcare business.

It is about a few days away from closure," the banker close to the transaction said. The banker declined to discuss details of what he described as a structured-equity product beyond saying that the instrument would be convertible into equity at a future date.

While KKR India chief executive Sanjay Nayar declined to comment, Apollo Hospitals joint MD Suneeta Reddy did not answer specific questions on the proposed investment. Structured equity is generally used to bridge the valuation gap between investor and issuer of the equity.

It is more commonly used in start-up, venture funds and smaller unlisted companies but in the current environment of economic uncertainty, it has become very common even in larger transactions, mainly in the unlisted space or at the holding companies level, h said Rajeev Suneja, Partner-Transaction Advisory Services, Ernst & Young.

With the stock prices of many companies correcting substantially and varying opinions on growth rate, determination of a fair-deal price has become challenging. Consequently gperformance-based or exit internal rate of return (IRR) based conversion formulas are gaining popularity typically with a floor and ceiling, he added.

Apollo Hospitals is likely to use the money to part-fund its expansion plans and cut debt. India 's leading hospital chain has lined up a Rs 2,400 crore expansion plan which is slated to be implemented over the next three years. The company plans to spend Rs 800-1,000 crore over the next 12 months. Our expansion plans envisages setting up of 3,000 new beds over the next three financial years.

And this will then enhance our network from a current capacity of 6,000 beds to 9,000 in 51 hospitals for FY15, Apollo Hospitals Joint Managing Director Suneeta Reddy had told analysts in an earning conference in February this year. The Chennai-based company plans to raise money for the expansion in phases.

The total debt requirement for expansion is over Rs 2,000 crore, which we will be raising in phases over the next three years. We have sufficient room for debt, A Krishnan, CFO, Apollo Hospitals had told this paper earlier this month. The planned transaction is the latest in a slew of deals in which KKR has invested in companies through complex products at a time when funding avenues such as plain vanilla equity are becoming unattractive due to sagging stock markets and macro-economic headwinds.

KKR has raised $100 million (Rs 670 crore) from Texas Teachers Fund last month to provide growth capital to Indian companies. This is in addition to the closure of its second Asia Fund that raised $6 billion (Rs 36,000 crore). In May, the fund purchased a majority control in a specialised tyre maker, Alliance Tire, for $500 million (around Rs 2,700 crore ). The company has factories in India and Israel. KKR had earlier provided so-called structured debt to Sajjan Jindal group and Chennai-based Sanmar group through its NBFC operations.